Total factor productivity growth and technical change in a profit functionframework

This paper develops a framework for measuring and decomposing TFP changes, within the parametric approach, by using directly the estimated parameters of a profit function. Two alternative relationships are derived for measuri ng and decomposing TFP changes via a profit function based on two alternati ve definitions of the rate of technical change, i.e., input- and output-bas ed. Initially a long-run equilibrium framework is assumed and then the anal ysis is extended to the case of temporary equilibrium. The latter framework is applied to US agriculture by estimating a translog profit function and analyzing TFP changes during the period 1948-1994.